How does this work?

Currently with the embedded PST system businesses are paying taxes on most of their inputs that go into producing their goods or service. These embedded taxes are factored in to the price consumers pay on the final product or service. The HST system would reimburse businesses for all PST on inputs; naturally this should result in a price reduction of the final product.

What ‘inputs’ are exempt for a restaurant?

• fridges, stoves, freezers, dishwashers and other appliances
• energy for heat, cooking and operating equipment and lighting
• cleaning supplies, such as rags, soaps and cleaning solutions,
• cash registers, computer hardware and software
• equipment repair and maintenance services
• paper towel and toilet paper
• customer food bills and menus
• cloth napkins, table cloths, tray covers and placemats
• pots, pans, kitchen implements and knives
• plates, bowls, glasses, cups, other reusable dishes, and cutlery
• coffee machines, blenders, mixers and other small appliances
• free-standing equipment such as juice dispensers, ice machines and coolers
• office equipment, supplies and furniture
• advertising materials, such as flyers and brochures
• items purchased to give away as free promotions

While the Harmonized Sales Tax will encourage new business startup, opponents of the HST system have pointed out that the savings associated with the new tax will not be realized for some time by many businesses that are already operating. For example, a restaurant established before the HST system will have already paid the embedded PST on their equipment and will not immediately benefit from the new streamlined tax. With recent increases to the cost of food and the slowing economy, restaurants operating on small budgets are already struggling to keep prices under control to avoid scaring consumers away.

Conversely, larger businesses and franchises are in a better position to absorb short term losses associated with lowering their prices, and can afford to raise wages and increase investments. Critics say this could effectively cut out smaller, locally established businesses from competing with larger corporations.

Rebates and Exemptions

The HST will not be charged on the following items that are currently not subject to PST:

• Basic groceries

• Prescription drugs

• Certain medical devices

• Child care

• Residential rents

• Municipal public transit

• Most health and education services

• Legal aid

• Most financial services

• Tutoring

• Music lessons

Consumers will not have to pay the provincial portion of the HST for:

• Qualifying prepared food and beverages sold for $4.00 or less

• Print newspapers

• Children’s clothing and footwear

• Children’s car seats and car booster seats

• Diapers

• Feminine hygiene products

• Books (including audio books)

Buyers of new homes will receive a rebate of up to $24,000 regardless of the price of the new home.

• Buyers of new residential rental properties will receive a similar rebate

• The HST will not apply to purchases of resale homes.

Taxable Status of Goods and Services for Consumers Under the HST – Examples

No Change in Taxable/Exempt Status

• Admissions to Sporting Events
• Adult Incontinence Products
• Auto Insurance
• Auto Rentals
• Basic Groceries
• Books
• Cable TV Service
• Cell Phone Charges
• Certain Medical Devices
• Child Car Seats and Car Booster Seats
• Child Care Services
• Children’s Clothing
• Children’s Footwear
• Cleaning Products (e.g., Soaps, Detergents)
• Clothing
• Crafting Supplies (Scissors, Yarn)
• Diapers
• Feminine Hygiene Products
• Furniture
• Home Insurance
• Home Maintenance Equipment (Lawnmowers, Snow Blowers, Sprinklers)
• Home Phone Services
• Luggage, Briefcases, Bags, etc.
• Mortgage Interest Costs
• Most Educational Services
• Most Health Care Services
• Movie Tickets
• Municipal Public Transportation
• Municipal Water
• Music Lessons
• Newspapers
• Over-the-Counter Medication
• Pharmacist Dispensing Fees
• Prepackaged Computer Software
• Prepared Foods Sold for $4 or Less
• Prescription Drugs
• Radios, Stereos, CD Equipment and Accessories
• Refrigerators and Freezers
• Residential Rent
• Restaurant Meals
• Tailoring
• Toys
• TVs, DVDs and Accessories
• Vehicle Repairs (Parts and Labour)
• Vehicles and Parts

Change in Taxable Status

• Electricity
• Gasoline
• Heating Fuels
• Internet Access Fees
• Personal Services (e.g., Hairstyling)
• Professional Services (e.g., Legal, Accounting and Real Estate Fees and Commissions)
• Tobacco

Most equipment restaurants need to operate on a daily basis will have HST exemptions, so it isn’t very shocking to see established fast food restaurant chains opposing restaurant HST. The larger, established restaurant chains have already paid the embedded PST on their operational equipment, while new restaurants will realize the HST exemptions immediately.

Read more about how HST can benefit restaurants and HST exemptions.

The nomealtax.ca HST petition can be signed at their website.

Although the government of Ontario recently chose to exempt low cost meals and items (those under $4) from the Harmonized Sale Tax (HST), restaurateurs warn that prices may still rise. Tim Horton’s, along with several prominent fast food chains and other countless small time businesses, has joined together with the Canadian Restaurateurs Food Association to protest the implementation of the HST. Posters and petitions for the ‘No Meal Tax’ have become a mainstay in Tim’s and other establishments across the provinces of BC and Ontario, with the website stating that the group has collected nearly 137,000 signatures.

While Ontarian’s are no longer looking at paying the added tax on items under $4, those exemptions have yet to be passed in BC, which means residents just might face an extra 7% when it comes to their favorite coffee. BC, on the other hand, is exempt from the costs of heating and hydro, costs which could effectively drive prices up on more than just menus.

Opposition towards the new tax is growing steadily and as the date for implementing the new tax is closing in, the time has never been better to join together to voice our discontentment. This is about more than coffee and doughnuts (though we care about those as well), as citizens we cannot allow our government to to coerce us into an unfair tax. The following statement from www.nomealtax.ca sums it up perfectly:

“If you don’t speak out against the new meal tax you’ll be paying 12% (13% ONT) on your bill for every bite you eat in or take out. That’s an additional 7% (8% ONT) tax on top of the 5% you already pay for food at restaurants and coffee shops. Everything from coffee to lunch at the campus or pizza with the kids. Gulp! Thousands of restaurant jobs could go down the drain as well. So petition your MLA or MP and get involved.”

The document outlines the various criteria that must be met in order for non-Canadian residents to be compensated for the GST/HST spent while working or vacationing here. These amendments are sure to bring a sigh of relief from communities that are heavily focused on tourism. With packages such as ski, golf and all inclusive resort stays now eligible for rebates, Canada’s tourist hot-spots wont be scaring off prospective vacationers with high taxes. This rings especially true for British Columbia and Ontario, as both provinces are set to implement HST in July.

While this is good news for businesses and the economy as a whole, consumers are likely to feel that they have been given a raw deal once again, because come summer they’ll have a lot more to cry about than ice-cream falling on shoes, as the cost of many items will now include a 7% (BC) and 8%(ONT) tax increase.

To read the report from CRA or to find out more on the HST please follow the links below.

http://www.cra-arc.gc.ca/E/pub/gm/27-3/27-3-e.pdf
www.hstincanada.com

Firstly, the minimum wage in British Columbia is the lowest in Canada at $8/hour. The restaurant industry has lobbied against the concept of hiking BC minimum wage to $10, which is the course of action New Brunswick has taken just this past week. Movements like the $10 Now campaign has been running a petition gaining support for increasing the minimum wage, which has been signed by 26,000 people. If interested, you can read more about the $10 Now campaign.

A second battle the restaurant industry has seemingly won, at least for now, is the requirement to post nutritional information about meals. Sean Holman reports:

“On Saturday, The Vancouver Sun’s Larry Pynn revealed the province is considering requiring restaurants to post nutritional information about their meals – an initiative the industry reported defeated at the federal-level.”

Watch Sean Holman reporting on this BC HST and what the government could use to quiet the restaurant industry.

Also all goods and services currently exempt from the GST, will be exempt from the HST. These include:

• basic groceries
• prescription drugs
• residential rent

Rebates

The B.C. Government has promised that low income families (under $25,000) and individuals (under $20,000) will receive $230 credit.

Residential energy rebate

• A rebate will be set up to ensure that HST will not increase the cost of heat or power in residential homes.

New home rebate

• New home buyers will not pay more in taxes than they would have under the old embedded PST system. This is applicable for houses under $525,000.
• New houses over $525,000 will receive a maximum of $26,250
• Used homes are not subject to HST

Zero-rated goods and services

• basic groceries such as milk, bread, and vegetables.
• agricultural products such as grain, raw wool, and dried tobacco leaves.
• most farm livestock.
• most fishery products such as fish for human consumption.
• prescription drugs and drug-dispensing fees.
• medical devices such as hearing aids; heart-monitoring devices; hospital beds; breathing apparatus; asthmatic devices; prescription eyeglasses/contact lenses; artificial eyes; artificial teeth such as dentures, crowns and bridges, orthodontic appliances; aids to locomotion such as a chair, commode chair, walker, wheelchair lift or other aid to locomotion for use by an individual with a disability; patient lifters; wheelchair ramp; portable wheelchair ramp; modifying motor vehicles to adapt the vehicle for the transportation of an individual using a wheelchair; prescription orthotic and orthopaedic devices; prosthesis/devices; canes or crutches; articles for blind individuals; guide dogs for blind individuals and hearing ear dogs; supplies and services related to medical and assistive devices.
• exports.

Exempt goods and services:

• imports of zero-rated goods (goods that are specifically taxed at zero per cent in Canada, such as prescription drugs)
• goods imported by a charity or public institution that have been donated to the charity or institution
• used residential housing
• long-term residential accommodation (of one month or more), and residential condominium fees
• some sales of vacant land or farmland
• most health, medical, and dental services performed by licensed physicians or dentists for medical reasons
• child-care services (day-care services for less than 24 hours a day) for children 14 years old and younger
• personal-care services for children, underprivileged individuals, or individuals with disabilities, when provided by a person operating an establishment for these individuals, in either institutional or non-institutional settings
• bridge, road, and ferry tolls (ferry tolls are taxed at zero per cent if the ferry service is to or from a place outside Canada)
• legal aid services
• many educational services, such as courses from a vocational school that lead to a certificate or a diploma to practise a trade or a vocation; or tutoring services for an individual who takes a course approved for credit by a school authority or the education service follows a curriculum designated by a school authority
• music lessons
• most food or beverages sold in an elementary or secondary school cafeteria primarily to students of the school and most meal plans provided in a university or public college
• most services provided by financial institutions such as arrangements for a loan or mortgage
• arranging for and issuing insurance policies by insurance companies, agents, and brokers
• certain goods and services provided by non-profit organizations, governments, and other public service bodies, such as municipal transit services and standard residential services such as water distribution
• most goods and services provided by charities.

Goods and services that are exempt when charities provide them:

• most services
• supplies of used or donated goods
• short-term residential accommodation (less than one month of occupancy)
• meals-on-wheels programs. This exemption is for a supply of food or beverages to seniors, underprivileged individuals, or individuals with a disability, under a program established and operated to provide prepared food to such individuals in their places of residence. Any supply of food or beverages made to a charity for these programs is also exempt from GST/HST
• parking space rentals
• facility rentals (e.g., halls for weddings); and catering services for private functions (e.g., wedding receptions)
• Fees for recreational programs are exempt from GST/HST if the programs are provided primarily to children 14 years of age and under (however, if there is overnight supervision throughout a substantial part of these programs, the fee is taxable).
• Recreational services provided primarily to underprivileged individuals, or individuals with a disability, are also exempt.

Under the GST and HST, there are three different ways that goods and services are treated: they are zero-rated, exempt or taxable.

Zero-rated

• Consumers do not pay HST on zero-rated items (i.e., they pay a zero per cent tax rate)
• Those making zero-rated supplies can claim input tax credits  to recover tax paid on inputs used in making those supplies.
• Examples: basic groceries, prescription drugs, medical devices, exports.

Exempt

• Consumers do not pay HST on exempt items (i.e., businesses or people making exempt supplies do not charge HST).
• Those making exempt supplies cannot claim input tax credits to recover tax paid on inputs used in making those supplies.
• Examples:  health and dental services, financial services, long-term residential rental accommodation, child-care services, educational services.

Taxable

• Most goods and services are taxable, which means that HST is charged on the supply of those items.
• Businesses making taxable supplies can claim input tax credits credits to recover tax paid on inputs used in making those supplies.
• Examples:  cars, clothing, furniture, haircuts.